HENNESSY ADVISORS INC
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
HNNA$10.19-3.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001437749-24-015367
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001437749-24-025553
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 74 previous paragraphs and 72 current paragraphs.
32 unchanged; 38 reworded; 2 added; 3 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
On a total return basis, the Dow Jones Industrial Average was up 18.51% for the nine months ended June 30, 2024. During the most recent quarter, equity prices declined modestly as investors adjusted to an increasing likelihood that the Federal Reserve may cut the Federal Funds rate perhaps only once during 2024, according to estimates from Bloomberg. Earlier this year, the market was pricing in no fewer than three to four cuts. While the labor market remains strong, there are anecdotal reports from retailers that consumers are starting to allocate their disposable income in a more cautious manner. With the release of corporate earnings in the first quarter of 2024, we saw a landscape where earnings growth outpaced revenue growth, which speaks to marginally higher profit margins. This news, in conjunction with the strong labor market, has reinforced the idea that the economy is no longer headed toward recessionary territory. According to Bloomberg, real GDP growth in 2024 is expected to come in around 2.3%, only modestly behind last year’s real GDP growth of 2.5%.
Current report
While long-term U.S. bond yields were essentially flat from the beginning of our fiscal year nine months ago, a strong labor market and economic resilience caused long-term yields to increase nicely since the beginning of 2024. The Federal Reserve’s 2% inflation goal continues to dominate its thinking as it ponders the course for interest rate changes. In May, the consumer price index advanced at a 3.3% rate, well above the 2% target. According to Federal Reserve Chairman Jerome Powell, inflation is not expected to reach its 2% target rate until late 2025 or even in 2026. Despite this prediction, the market continues to hold out hope that the Fed may be able to cut interest rates even with elevated levels of inflation.
Removed paragraphs (3)
Previous report
On a total return basis, the Dow Jones Industrial Average was up 20.03% for the six months ended March 31, 2024. During the most recent quarter, equity prices advanced as investors increasingly felt that inflation would continue to moderate, the economy would continue to expand, and the employment outlook would remain strong. While the rate of inflation continues to be above the Federal Reserve’s stated 2% target, the market continues to anticipate that the Federal Reserve will cut rates during this calendar year, although at a slower pace compared to expectations at the end of 2023. Further, the prospect of rate cuts while the economy continues to expand has provided comfort to those who believed rate cuts would only occur once the economy started to contract. While revenue growth has outpaced earnings growth in recent quarters, consensus estimates for the quarter ended March 31, 2024, suggest the opposite. If the estimates hold true, strengthened earnings growth is an indicator that profit margins are stabilizing and, perhaps, even expanding.
Previous report
Long-term U.S. bond yields increased during the three months ended March 31, 2024, as estimates for economic growth continued to be adjusted upward, albeit slightly. In addition, the unemployment rate, while higher than at the end of 2023, continued to demonstrate an economy that is stronger than many expected. The result of stronger economic data has been a ratcheting down of expectations regarding Federal Reserve interest rate cuts. While a few months ago, the market anticipated six rates cuts in 2024, the market is now pricing in fewer than two, according to Bloomberg. The market’s ability to rally in the face of higher 10-year rates and fewer short-term rate cuts suggests that a “soft landing” could be expected. The prospect of lower short-term rates while the economy continues to grow has likely fueled the recent rally. While investors had at one point anticipated more rate cuts in the near term, that was likely predicated on the fear of an economic recession.
Previous report
Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, compensation and benefits expense increased by 8.7%, from $3.8 million to $4.1 million. As a percentage of total revenue, compensation and benefits expense remained flat at 31.4%.
Reworded paragraphs (38)
Previous wording
The Japanese equity market was up 18.86% in U.S. dollar terms over the six months ended March 31, 2024, as measured by the Tokyo Stock Price Index. During the period, Japanese equities traded higher as investors cheered stronger corporate earnings, a weaker yen, and more shareholder friendly corporate governance.
Current wording
The Japanese equity market was up 13.72% in U.S. dollar terms over the nine months ended June 30, 2024, as measured by the Tokyo Stock Price Index. During the period, Japanese equities traded higher as investors cheered stronger corporate earnings, a weaker yen, and more shareholder friendly corporate governance.
Previous wording
For the twelve months ended March 31, 2024, all 17 Hennessy Funds generated positive total returns. For the three‑year period ended March 31, 2024, nearly all of the 17 Hennessy Funds posted positive annualized total returns, with the exceptions of the Hennessy Japan Small Cap Fund, the Hennessy Small Cap Financial Fund, and the Hennessy Large Cap Financial Fund. Over the longer term, all of the Hennessy Funds with at least five or ten years of operating history posted positive returns in each of the five- and ten-year periods ended March 31, 2024.
Current wording
For the twelve months ended June 30, 2024, all 17 Hennessy Funds generated positive total returns. For the three‑year period ended June 30, 2024, nearly all of the 17 Hennessy Funds posted positive annualized total returns, with the exception of the Hennessy Focus Fund, the Hennessy Japan Small Cap Fund, the Hennessy Large Cap Financial Fund, and the Hennessy Small Cap Financial Fund. Over the longer term, all of the Hennessy Funds with at least five or ten years of operating history posted positive returns in each of the five- and ten-year periods ended June 30, 2024.
Previous wording
We provide service to over 170,000 fund accounts nationwide, including accounts held by investors who employ financial advisors to assist them with investing as well as accounts held by retail investors who invest directly with us. We serve approximately 11,000 financial advisors who utilize the Hennessy Funds on behalf of their clients, including nearly 400 who purchased one of our Funds for the first time during the most recent quarter. Approximately 17% of such advisors own two or more Hennessy Funds, and nearly 500 advisors hold a position of over $500,000. While numbers have declined in recent years, we continue to focus significant efforts on building and maintaining brand loyalty among our top tier of advisors.
Current wording
We provide service to over 180,000 fund accounts nationwide, including accounts held by investors who employ financial advisors to assist them with investing as well as accounts held by retail investors who invest directly with us. We serve approximately 11,500 financial advisors who utilize the Hennessy Funds on behalf of their clients, including over 450 who purchased one of our Funds for the first time during the most recent quarter. Approximately 17% of such advisors own two or more Hennessy Funds, and over 500 advisors hold a position of over $500,000. While numbers have declined in recent years, we continue to focus significant efforts on building and maintaining brand loyalty among our top tier of advisors.
Previous wording
Total assets under management as of March 31, 2024, was $3.9 billion, an increase of $1.0 billion, or 35.5%, compared to March 31, 2023. The increase in total assets was attributable to market appreciation, net inflows into the Hennessy Funds, and the purchase of the assets related to the CCM Funds.
Current wording
Total assets under management as of June 30, 2024, was $4.0 billion, an increase of $1.1 billion, or 35.9%, compared to June 30, 2023. The increase in total assets was attributable to net inflows into the Hennessy Funds, market appreciation, and the purchase of the assets related to the CCM Funds.
Previous wording
The principal asset on our balance sheet, the management contract asset, represents the capitalized costs incurred in connection with the purchase of the assets related to the management of investment funds. As of March 31, 2024, this asset had a net balance of $82.3 million, compared to $81.3 million as of September 30, 2023. The increase was due to the purchase of assets related to the management of the CCM Funds.
Current wording
The principal asset on our balance sheet, the management contracts asset, represents the capitalized costs incurred in connection with the purchase of the assets related to the management of investment funds. As of June 30, 2024, this asset had a net balance of $82.3 million, compared to $81.3 million as of September 30, 2023. The increase was due to the purchase of assets related to the management of the CCM Funds.
Previous wording
On October 20, 2021, we completed a public offering of the 2026 Notes in the aggregate principal amount of $40.25 million, which included the full exercise of the underwriters’ overallotment option. The 2026 Notes mature on December 31, 2026, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 31, 2023. The 2026 Notes bear interest at 4.875% per annum, payable on the last day of each calendar quarter and at maturity, beginning December 31, 2021. The 2026 Notes are direct unsecured obligations, rank equally in right of payment with any of our future unsecured unsubordinated indebtedness, senior to any of our future indebtedness that expressly provides that it is subordinate to the 2026 Notes, effectively subordinate to all of our existing and future secured indebtedness, and structurally subordinated to all existing and future indebtedness and other obligations of any future subsidiaries of ours.
Current wording
On October 20, 2021, we completed a public offering of the 2026 Notes in the aggregate principal amount of $40.25 million, which included the full exercise of the underwriters’ overallotment option. The 2026 Notes mature on December 31, 2026, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 31, 2023. The 2026 Notes bear interest at 4.875% per annum, payable on the last day of each calendar quarter and at maturity, beginning December 31, 2021. The 2026 Notes are direct unsecured obligations, rank equally in right of payment with any of our future unsecured unsubordinated indebtedness, senior to any of our future indebtedness that expressly provides that it is subordinate to the 2026 Notes, effectively subordinate to all of our future secured indebtedness, and structurally subordinate to all future indebtedness and other obligations of any future subsidiaries of ours.
Previous wording
The 2026 Notes are the principal liability on our balance sheet at $39.3 million, net of issuance costs.
Current wording
The 2026 Notes are the principal liability on our balance sheet at $39.4 million, net of issuance costs.
Previous wording
On October 20, 2021, we completed a public offering of our 2026 Notes in the aggregate principal amount of $40.25 million, which included the full exercise of the underwriters’ overallotment option. The 2026 Notes mature on December 31, 2026, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 31, 2023. The 2026 Notes bear interest at 4.875% per annum, payable on the last day of each calendar quarter and at maturity, beginning December 31, 2021. The 2026 Notes are direct unsecured obligations, rank equally in right of payment with any of our future unsecured unsubordinated indebtedness, senior to any of our future indebtedness that expressly provides that it is subordinate to the 2026 Notes, effectively subordinate to all of our existing and future secured indebtedness, and structurally subordinated to all existing and future indebtedness and other obligations of any future subsidiaries of ours.
Current wording
As discussed above, on October 20, 2021, we completed a public offering of our 2026 Notes in the aggregate principal amount of $40.25 million. The 2026 Notes mature on December 31, 2026, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 31, 2023.
Previous wording
Our total assets under management as of March 31, 2024, was $3.9 billion, an increase of $1.0 billion, or 35.5%, compared to March 31, 2023. The primary sources of our revenue, liquidity, and cash flow are our investment advisory fees and shareholder service fees, which are based on and generated by our average assets under management. Our average assets under management for the six months ended March 31, 2024, was $3.2 billion, an increase of $0.2 billion, or 7.7%, compared to the six months ended March 31, 2023. As of March 31, 2024, we had cash and cash equivalents of $59.6 million.
Current wording
Our total assets under management as of June 30, 2024, was $4.0 billion, an increase of $1.1 billion, or 35.9%, compared to June 30, 2023. The primary sources of our revenue, liquidity, and cash flow are our investment advisory fees and shareholder service fees, which are based on and generated by our average assets under management. Our average assets under management for the nine months ended June 30, 2024, was $3.5 billion, an increase of $0.5 billion, or 16.9%, compared to the nine months ended June 30, 2023. As of June 30, 2024, we had cash and cash equivalents of $62.0 million.
Previous wording
The increase in cash provided by operating activities of $0.3 million was primarily due to timing of cash payments and also due to increased net income in the current period.
Current wording
The increase in cash provided by operating activities of $1.2 million was primarily due to increased net income in the current period.
Previous wording
The increase in cash used in investing activities of $0.6 million was due to the costs associated with the purchase of assets related to the management of the CCM Funds in the current period.
Current wording
The increase in cash used in investing activities of $0.5 million was primarily due to the costs associated with the purchase of assets related to the management of the CCM Funds in the current period.
Previous wording
The increase in cash used in financing activities of $0.02 million was due to the increased dollar amount of dividends paid as a result of having more shares outstanding in the current period than in the prior comparable period.
Current wording
The increase in cash used in financing activities of $0.03 million was due to the increased dollar amount of dividends paid as a result of having more shares outstanding in the current period than in the prior comparable period.
Previous wording
Total revenue comprises investment advisory fees and shareholder service fees. Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, total revenue increased by 17.3%, from $5.9 million to $6.9 million, investment advisory fees increased by 18.4%, from $5.4 million to $6.4 million, and shareholder service fees increased by 4.8%, from $0.48 million to $0.50 million. Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, total revenue increased by 8.5% from $12.1 million to $13.1 million, investment advisory fees increased by 9.1%, from $11.1 million to $12.1 million, and shareholder service fees increased by 1.1%, from $0.97 million to $0.98 million.
Current wording
Total revenue comprises investment advisory fees and shareholder service fees. Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, total revenue increased by 36.5%, from $5.7 million to $7.8 million, investment advisory fees increased by 38.3%, from $5.2 million to $7.2 million, and shareholder service fees increased by 16.6%, from $0.47 million to $0.54 million. Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, total revenue increased by 17.5% from $17.8 million to $20.9 million, investment advisory fees increased by 18.5%, from $16.3 million to $19.3 million, and shareholder service fees increased by 6.1%, from $1.4 million to $1.5 million.
Previous wording
We collect investment advisory fees from each of the Hennessy Funds at differing annual rates. These annual rates range between 0.40% and 1.25% of average daily net assets. Average daily net assets of the Hennessy Funds for the three months ended March 31, 2024, was $3.5 billion, which represents an increase of $0.5 billion, or 15.9%, compared to the three months ended March 31, 2023, and average daily net assets for the six months ended March 31, 2024, was $3.2 billion, which represents an increase of $0.2 billion, or 7.7%, compared to the six months ended March 31, 2023. The Hennessy Fund with the largest average daily net assets for the three and six months ended March 31, 2024, was the Hennessy Cornerstone Mid Cap 30 Fund, with $0.83 billion and $0.74 billion, respectively. We collect an investment advisory fee from the Hennessy Cornerstone Mid Cap 30 Fund at an annual rate of 0.74% of average daily net assets. The Hennessy Fund with the second largest average daily assets for the three and six months ended March 31, 2024, was the Hennessy Focus Fund, with $0.66 billion and $0.63 billion, respectively. We collect an investment advisory fee from the Hennessy Focus Fund at an annual rate of 0.90% of average daily net assets. However, we pay a sub‑advisory fee at an annual rate of 0.29% to the fund’s sub-advisor, which reduces the net operating profit contribution of the fund to our financial operations.
Current wording
We collect investment advisory fees from each of the Hennessy Funds at differing annual rates. These annual rates range between 0.40% and 1.25% of average daily net assets. Average daily net assets of the Hennessy Funds for the three months ended June 30, 2024, was $3.9 billion, which represents an increase of $1.0 billion, or 36.6%, compared to the three months ended June 30, 2023, and average daily net assets for the nine months ended June 30, 2024, was $3.5 billion, which represents an increase of $0.5 billion, or 16.9%, compared to the nine months ended June 30, 2023. The Hennessy Fund with the largest average daily net assets for the three and nine months ended June 30, 2024, was the Hennessy Cornerstone Mid Cap 30 Fund, with $1.1 billion and $0.9 billion, respectively. We collect an investment advisory fee from the Hennessy Cornerstone Mid Cap 30 Fund at an annual rate of 0.74% of average daily net assets. The Hennessy Fund with the second largest average daily assets for the three and nine months ended June 30, 2024, was the Hennessy Focus Fund, with $0.64 billion and $0.63 billion, respectively. We collect an investment advisory fee from the Hennessy Focus Fund at an annual rate of 0.90% of average daily net assets. However, we pay a sub‑advisory fee at an annual rate of 0.29% to the fund’s sub-advisor, which reduces the net operating profit contribution of the fund to our financial operations.
Previous wording
Total assets under management as of March 31, 2024, was $3.9 billion, an increase of $1.0 billion, or 35.5%, compared to March 31, 2023. The increase in total assets was attributable to market appreciation, net inflows into the Hennessy Funds, and the purchase of the assets related to the CCM Funds.
Current wording
Total assets under management as of June 30, 2024, was $4.0 billion, an increase of $1.1 billion, or 35.9%, compared to June 30, 2023. The increase in total assets was attributable to net inflows into the Hennessy Funds, market appreciation, and the purchase of the assets related to the CCM Funds.
Previous wording
Redemptions as a percentage of assets under management decreased from an average of 3.0% per month during the three months ended March 31, 2023, to an average of 2.2% per month during the three months ended March 31, 2024. Redemptions as a percentage of assets under management decreased from an average of 3.2% per month during the six months ended March 31, 2023, to an average of 2.5% per month during the six months ended March 31, 2024.
Current wording
Redemptions as a percentage of assets under management increased from an average of 2.1% per month during the three months ended June 30, 2023, to an average of 2.2% per month during the three months ended June 30, 2024. Redemptions as a percentage of assets under management decreased from an average of 2.8% per month during the nine months ended June 30, 2023, to an average of 2.4% per month during the nine months ended June 30, 2024.
Previous wording
Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, total operating expenses increased by 16.1%, from $4.3 million to $5.0 million. As a percentage of total revenue, total operating expenses decreased 0.8 percentage points to 72.3%.
Current wording
Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, total operating expenses increased by 20.4%, from $4.3 million to $5.2 million. As a percentage of total revenue, total operating expenses decreased 9.0 percentage points to 66.8%.
Previous wording
Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, total operating expenses increased by 9.9%, from $8.9 million to $9.7 million. As a percentage of total revenue, total operating expenses increased 0.9 percentage points to 74.4%.
Current wording
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, total operating expenses increased by 13.3%, from $13.2 million to $14.9 million. As a percentage of total revenue, total operating expenses decreased 2.6 percentage points to 71.6%.
Previous wording
Compensation and Benefits Expense: Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, compensation and benefits expense increased by 16.7%, from $1.9 million to $2.3 million. As a percentage of total revenue, compensation and benefits expense decreased 0.1 percentage points to 32.5%.
Current wording
Compensation and Benefits Expense: Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, compensation and benefits expense increased by 17.1%, from $1.9 million to $2.3 million. As a percentage of total revenue, compensation and benefits expense decreased 4.9 percentage points to 29.2%. The dollar value increase in compensation and benefit expense was due to the ERC received in the prior comparable period, as discussed in Note 1 to Item 1, "Unaudited Condensed Financial Statements."
Previous wording
In both periods, the dollar value increase in compensation and benefit expense was due to an increase in incentive-based compensation.
Current wording
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, compensation and benefits expense increased by 11.6%, from $5.7 million to $6.4 million. As a percentage of total revenue, compensation and benefits expense decreased 1.7 percentage points to 30.6%. The dollar value increase in compensation and benefit expense was due to an increase in incentive-based compensation in the current period and also due to the ERC received in the prior comparable period, as discussed in Note 1 to Item 1, "Unaudited Condensed Financial Statements."
Previous wording
General and Administrative Expense: Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, general and administrative expense increased by 14.7%, from $1.3 million to $1.5 million. As a percentage of total revenue, general and administrative expense decreased 0.5 percentage points to 21.1%.
Current wording
General and Administrative Expense: Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, general and administrative expense increased by 19.4%, from $1.3 million to $1.6 million. As a percentage of total revenue, general and administrative expense decreased 2.9 percentage points to 20.0%.
Previous wording
Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, general and administrative expense increased by 12.1%, from $2.8 million to $3.2 million. As a percentage of total revenue, general and administrative expense increased 0.8 percentage points to 24.4%.
Current wording
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, general and administrative expense increased by 14.4%, from $4.1 million to $4.7 million. As a percentage of total revenue, general and administrative expense decreased 0.7 percentage points to 22.7%.
Previous wording
In both periods, the increase in general and administrative expense was primarily due to increased commission expense on sales of our investment products.
Current wording
In both periods, the dollar value increase in general and administrative expense was primarily due to increased commission expense on sales of the Hennessy Funds.
Previous wording
Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, fund distribution and other expense increased by 52.3%, from $0.1 million to $0.2 million. As a percentage of total revenue, fund distribution and other expense increased 0.7 percentage points to 2.9%. The increase in fund distribution and other expense was primarily due to increased average daily net assets of the Hennessy Funds. Additionally, there was an increase in operating expenses relating to the Hennessy Stance ESG ETF, which had greater average daily net assets resulting from the purchase of assets related to the CCM Core Impact Fund in the current period.
Current wording
Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, fund distribution and other expense increased by 96.6%, from $0.1 million to $0.2 million. As a percentage of total revenue, fund distribution and other expense increased 0.9 percentage points to 2.9%. The increase in fund distribution and other expense was primarily due to increased average daily net assets across the Hennessy Funds. Additionally, there was an increase in operating expenses relating to the Hennessy Stance ESG ETF, which had greater average daily net assets in the current period resulting from the purchase of assets related to the management of the CCM Core Impact Fund and subsequent reorganization of such assets into the Hennessy Stance ESG ETF. Such reorganization, which was effective as of February 23, 2024, nearly doubled the average daily net assets of the Hennessy Stance ESG ETF.
Previous wording
Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, fund distribution and other expense increased by 54.2%, from $0.2 million to $0.4 million. As a percentage of total revenue, fund distribution and other expense increased 0.8 percentage points to 2.7%. The increase in fund distribution and other expense was primarily due to the additional expenses relating to the Hennessy Stance ESG ETF resulting from the purchase of assets related to the CCM Funds in the current period, and also due to increased average daily net assets of the Hennessy Funds. The increase can also be attributed to a full period of fees incurred by us for the operations of the Hennessy Stance ESG ETF in the current period. We began advising the Hennessy Stance ESG ETF on December 22, 2022, and therefore only a partial period of expenses related to its operations were incurred in the prior comparable period.
Current wording
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, fund distribution and other expense increased by 68.5%, from $0.3 million to $0.6 million. As a percentage of total revenue, fund distribution and other expense increased 0.9 percentage points to 2.8%. The increase in fund distribution and other expense was primarily due to the additional expenses relating to the Hennessy Stance ESG ETF resulting from the purchase of assets related to the management of the CCM Funds and subsequent reorganization of such assets into the Hennessy Stance ESG ETF in the current period, but was also due to increased average daily net assets across the Hennessy Funds. In addition, the increase was also partially attributable to a full period of fees incurred by us for the operations of the Hennessy Stance ESG ETF in the current period. We began advising the Hennessy Stance ESG ETF on December 22, 2022, and therefore only a partial period of expenses related to its operations were incurred in the prior comparable period.
Previous wording
Sub-Advisory Fees Expense: Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, sub-advisory fees expense increased by 12.5%, from $0.9 million to $1.0 million. As a percentage of total revenue, sub-advisory fees expense decreased 0.6 percentage points to 15.1%.
Current wording
Sub-Advisory Fees Expense: Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, sub-advisory fees expense increased by 20.4%, from $0.9 million to $1.1 million. As a percentage of total revenue, sub-advisory fees expense decreased 1.9 percentage points to 13.9%.
Previous wording
Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, sub-advisory fees expense increased by 3.1%, from $1.9 million to $2.0 million. As a percentage of total revenue, sub-advisory fees expense decreased 0.7 percentage points to 15.0%.
Current wording
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, sub-advisory fees expense increased by 8.6%, from $2.8 million to $3.0 million. As a percentage of total revenue, sub-advisory fees expense decreased 1.1 percentage points to 14.6%.
Previous wording
In both periods, the dollar value increase in sub-advisory fees expense was due to increased average daily net assets of the sub‑advised Hennessy Funds, the expense associated with new sub-advisory relationships relating to the Hennessy Stance ESG ETF that became effective on December 22, 2022, and the increase in assets of the Hennessy Stance ESG ETF as a result of the purchase of assets related to the management of the CCM Funds and subsequent reorganization of such assets into the Hennessy Stance ESG ETF.
Current wording
In both periods, the dollar value increase in sub-advisory fees expense was due to increased average daily net assets of the sub‑advised Hennessy Funds, the expense associated with new sub-advisory relationships relating to the Hennessy Stance ESG ETF that became effective on December 22, 2022, and the increase in average daily net assets of the Hennessy Stance ESG ETF as a result of the purchase of assets related to the management of the CCM Funds and subsequent reorganization of such assets into the Hennessy Stance ESG ETF.
Previous wording
Depreciation Expense: Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, depreciation expense increased by 1.8%, from $0.056 million to $0.057 million. As a percentage of total revenue, depreciation expense decreased 0.3 percentage points to 0.7%.
Current wording
Depreciation Expense: Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, depreciation expense remained the same at $0.06 million. As a percentage of total revenue, depreciation expense decreased 0.2 percentage points to 0.8%.
Previous wording
Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, depreciation expense increased by 20.0%, from $0.11 million to $0.13 million. As a percentage of total revenue, depreciation expense remained the same at 0.9%.
Current wording
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, depreciation expense increased by 12.8%, from $0.16 million to $0.19 million. As a percentage of total revenue, depreciation expense remained the same at 0.9%. The dollar value increase in depreciation expense resulted from new fixed asset purchases, partially offset by the write-off of fully depreciated assets.
Previous wording
Interest income consists of interest earned on cash and cash equivalents. Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, interest income increased from $0.58 million to $0.77 million. Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, interest income increased from $1.0 million to $1.6 million.
Current wording
Interest income consists of interest earned on cash and cash equivalents. Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, interest income increased from $0.7 million to $0.8 million. Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, interest income increased from $1.8 million to $2.3 million.
Previous wording
In both periods, the increase in interest income resulted from increased interest rates.
Current wording
In both periods, the increase in interest income resulted from increased interest rates and increased principal balances.
Previous wording
Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, interest expense increased from $0.56 million to $0.57 million. Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, interest expense increased from $1.13 million to $1.14 million.
Current wording
Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, interest expense increased from $0.565 million to $0.569 million. Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, interest expense increased from $1.69 million to $1.70 million.
Previous wording
In both periods, the increase in interest expense was due to the manner in which interest expense is calculated under accounting principles generally accepted in the United States. The issuance costs related to the 2026 Notes that have been capitalized are amortized over time and therefore increase the carrying amount of the 2026 Notes. As the carrying amount of the 2026 Notes increases, the interest expense on the 2026 Notes for financial statement purposes also increases.
Current wording
In both periods, the increase in interest expense was due to the manner in which interest expense is calculated under U.S. GAAP. The issuance costs related to the 2026 Notes that have been capitalized are amortized over time and therefore increase the carrying amount of the 2026 Notes. As the carrying amount of the 2026 Notes increases, the interest expense on the 2026 Notes for financial statement purposes also increases.
Previous wording
Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, income tax expense increased by 40.2%, from $0.4 million to $0.6 million. Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, income tax expense increased by 27.5%, from $0.8 million to $1.0 million.
Current wording
Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, income tax expense increased by 84.2%, from $0.4 million to $0.8 million. Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, income tax expense increased by 46.7%, from $1.2 million to $1.8 million.
Previous wording
In both periods, the increase in income tax expense was due to increased net operating income, as well as a higher effective income tax rate in the current period due to a greater exposure to state income tax liability based on the location of our fund shareholders.
Current wording
In both periods, the increase in income tax expense was due to increased net operating income, as well as a higher effective income tax rate in the current period due to a greater exposure to state income tax liability based on the location of investors in the Hennessy Funds.
Previous wording
Comparing the three months ended March 31, 2023, to the three months ended March 31, 2024, net income increased by 28.9%, from $1.2 million to $1.5 million. Comparing the six months ended March 31, 2023, to the six months ended March 31, 2024, net income increased by 18.4%, from $2.3 million to $2.7 million.
Current wording
Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, net income increased by 81.8%, from $1.1 million to $2.0 million. Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, net income increased by 39.0%, from $3.4 million to $4.8 million.
Previous wording
Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States, which require the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These accounting policies, methods, and estimates are an integral part of the financial statements prepared by management and are based upon management’s current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods, and estimates are particularly sensitive because of their significance to the financial statements and because future events affecting them may differ markedly from management’s current judgment. For a discussion of the accounting policies and estimates that we believe are most critical to understanding our results of operations and financial position, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10‑K for the fiscal year ended September 30, 2023.
Current wording
Our financial statements and accompanying notes are prepared in accordance with U.S. GAAP, which require the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These accounting policies, methods, and estimates are an integral part of the financial statements prepared by management and are based upon management’s current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods, and estimates are particularly sensitive because of their significance to the financial statements and because future events affecting them may differ markedly from management’s current judgment. For a discussion of the accounting policies and estimates that we believe are most critical to understanding our results of operations and financial position, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10‑K for the fiscal year ended September 30, 2023. There has been no material change to our critical accounting estimates disclosed in such Annual Report.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
In both periods, the dollar value increase in depreciation expense resulted from new fixed asset purchases, partially offset by the write-off of fully depreciated assets.